Do governance indicators play a role in banking crises?

Abstract

Introduction Institutions have a significant impact on the economic structure through its effect on production, change, investment, savings, and so on (Biber, 2010). The structure called the institution can be defined as rules that determine behavioral relationships between individuals. In this context, the social behaviors, beliefs, manners of private or public spheres, political relations, approaches to other societies, and interactions of these with each other constitute the institutional structure of a country. As can be seen from the definition, the institutional structure takes on a different form for each country and society. This network of relationships, which are naturally related to a cultural area, may change over time as the cultures change with the change of time. When the issue is taken into account from the extent of the impact on the society, the institutions have a structure which can affect the use of natural and human resources. Therefore, countries which are able to develop their institutions can achieve sustainable economic growth trend. In this study, some indicators for the assessment of institutions are utilized. These are six different indicators of the Governance Indicators (GI). These indicators are as follows: Voice and accountability (VOA), political stability and absence of violence/terrorism (PSA), government effectiveness (GOE), regulatory quality (REQ), rule of law (ROL), and control of corruption (COC). Higher scores indicate better governance performance in all indicators except COC. A higher score in COC indicator means less corruption. Kaufmann et al. (2011) summarizes the…. © Peter Lang GmbH Internationaler Verlag der Wissenschaften Berlin 2019.